IBM’s $10 Billion Share Buyback

Shares of IBM (IBM) are getting a nice boost today on news that the company has approved a $10 billion share buyback plan.

OK, that’s nice and it makes for great press releases.

But here’s my contention. How would shareholders vote if they had the choice between $8 per share now or a $10 billion buyback plan that will theoretically lift the stock by $8 per share?

Even after considering the tax consequences, I have no doubt that shareholders would vote for the cash. And those who want more shares could use their new cash to buy more IBM stock. It’s that simple. But IBM is giving no choice to its shareholders and it’s using corporate cash to buy a stock that’s doubled in less than two years.

(We should also remember that IBM merely approved a buyback plan. It may take a long time to be implemented.)

Posted by on October 26th, 2010 at 10:57 am


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